Indian Automotive Industry: Opportunities and Challenges Posed By Recent Developments

The Indian automobile industry is currently experiencing an unprecedentedboom in demand for all types of vehicles. This boom has been triggered primarily by two factors:(1) increase in disposable incomes and standards of living of middle class Indian families estimatedto be as many as four million in number; and (2) the Indian government's liberalization measuressuch as relaxation of the foreign exchange and equity regulations, reduction of tariffs on imports,and banking liberalization that has fueled financing-driven purchases. Industry observers predictthat passenger vehicle sales will triple in five years to about one million, and as the market growsand customer's purchasing abilities rise, there will be greater demand for higher-end models whichcurrently constitute only a tiny fraction of the market. These trends have encouraged many multinationalautomakers from Japan, U. S. A., and Europe to enter the Indian market mainly throughjoint ventures with Indian firms. This paper presents an introduction to the key players in theIndian automotive industry, a summary of the recent developments, and an analysis of theopportunities and challenges facing the various players (Indian and multi-national assemblers andcomponent makers) in the areas of product development, production, and distribution.